December 3, 2009 by admin
Filed under Economics, Opinion
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By Kevin Lee
Earlier this decade, PM Lee Hsien Loong & the PAP faced a
problem with Singapore’s population economics. With the country’s
fertility rate way below the replacement rate of 2.1, Singaporeans
were not making enough babies to replace themselves. The potential
burden of this phenomenon was obvious – amongst other issues, the
cost of supporting an aging population would have to be borne by a
smaller workforce, and the government did not want to have to
sustain this liability in the future.
In order to arrest the problems presented by a resident
population failing to replace itself, the PAP has resorted to the
quick-fix policy of opening the country’s shores to foreigners. A
massive influx of immigrants and foreigners has resulted in the
rapid increase of Singapore’s population. Between 2003 and June
2009, the population increased from an estimated 4.2m to 5m, or an
increase of 19 per cent in less than a decade.
While this has, in the short-term, drastically expanded the
productive work force, the longer-term impact of the PAP’s
immigration policy has been to exacerbate the already challenging
living conditions which have discouraged Singaporeans from having
children. Directly attributable to the Government’s immigration
policy, are two major side-effects which have made it more
difficult for Singaporeans to have children.
Firstly, the cost of living for the majority of Singaporeans has
risen. In particular, the escalating cost of housing to
unaffordable levels is acting as an obvious hurdle towards family
formation. A couple which is unable to afford a roof over their
heads will obviously find it very difficult to start a family.
After all, the most basic thing parents must provide to their
children is a roof over their heads. Yet, instead of bringing down
the cost of housing, the combination of a spike in housing demand
and stagnation in supply has sent property prices to record levels.
(ref. ‘PAP MP blames young couples who cannot get flats for not
“planning ahead”’)
Secondly, labour productivity has declined. Singapore’s labour
productivity levels have been falling for six consecutive quarters
starting in the fourth quarter of 2007. The decline has been
worsening each quarter, with the first three months of 2009 seeing
the largest drop so far at minus 14.7 percent. (ref. “National
focus needed on efforts to boost labour productivity”, CNA).
Singaporeans are working harder and longer and with less to show
for it. Naturally, they have less time and money to spend on their
children.
The benefits of productivity on family formation are obvious.
Workers who accomplish the same amount of work in shorter periods
of time will have more time to spend on their family. Similarly,
workers who accomplish more work in the same period of time will be
able to earn higher incomes and thus be better able to afford a
family. Instead of improving productivity, however, the PAP has
chosen an immigration policy which has had a direct impact on this
key economic statistic. The large influx of foreign workers in
recent years means that each worker doesn’t have to work as hard.
It also means that positions are constantly being filled by newbies
without experience. (read article
here)
The combined effect of housing price inflation and the decline
in labour productivity has been to make the real cost of bringing
up a child even more expensive, and thus further discourage couples
from having children. Meanwhile, little attention is being paid to
initiatives which can make a genuine impact on the standard of
living.
The solution to the housing affordability problem is simple.
Either supply more flats or decrease the demand. The lack of proper
planning by the PAP on this issue is quite perplexing, but this
issue has been dealt with by other writers and I will not repeat
their arguments here. (read article
here)
The deeper problem is that of labour productivity.
An improvement in labour productivity does not only require the
education & upgrading of the workforce, but a fundamental
change in mentality of employers from a low-cost of labour
mentality to a higher value-added mentality. Meanwhile, it seems
that the only solution that the PAP has to throw at the
productivity problem is to point the finger at workers for not
upgrading themselves.
While skills upgrading is part of the solution, it is only one
side of the productivity equation. Just as important is paying
attention to improving the working conditions of employees and
protecting workers’ rights. Employers in Singapore blame
Singaporeans for shunning so-called ‘menial’ or ‘unskilled’ jobs,
yet the only solution they seem to have is to throw cheap foreign
labour into these jobs such as construction or frontline retail
services. The tougher but more rewarding option of
professionalising and dignifying such jobs is thrown to the
wayside.
Contrary to what some may think, a career in construction can be
a meaningful, dignified one. A construction worker who takes pride
in his technical work and who has accumulated experience will
certainly be much more productive than a cheap foreign import. When
given the right tools and proper working conditions, his higher
productivity will also justify a much more respectable salary than
the pittance that is currently paid in the industry. Yet, keeping
wages low and working conditions poor is a surefire way to make the
job disrespectable, and for companies to lose their top
performers.
Similarly, frontline sales staff in retail can make a
significant difference to the bottom line if they are well trained,
respectably paid, and given good working conditions. Conversely,
untrained foreigners who do not even speak the language of
business, are obviously unable to add significant value to a retail
operation and sometimes even turn away prospective sales. (read
article
here)
In spite of this simple logic, the government’s immigration
policy continues to foster a low-cost mentality rather than a
value-added mentality by allowing local businesses to import cheap
labour, which only serves to keep wages depressed and working
conditions lousy. To be fair, enterprises are also to blame for
perpetuating their low-cost mentality. But if nobody makes an
effort, how will things ever improve?
Labour productivity also improves with innovation &
entrepreneurship. A significant improvement in manufacturing
techniques can allow a factory to dramatically increase its output
given the same number of workers. Meanwhile, technological
innovations in engineering or computing allow the formations of new
enterprises and the creation of value-added jobs. Yet, the
government continues to pursue policies which encourage an
iron-rice bowl mentality rather than bold enterprise.
In particular, the scholarship system encourages Singapore’s
brightest students to pursue a safe (bonded) career in government
rather than one in the private sector. It systematically sucks out
the brightest minds from innovating in the marketplace, into the
ranks of the public service. Instead of finding solutions to
scientific problems, bringing new products to market or searching
for a cure for cancer, Singapore’s top young brains are writing
policy papers and goodness knows what else, in ’silent resentment
and ultimate dissatisfaction’.
The PAP argues that the government needs top brains in order to
run efficiently and effectively. Yet, the stark reality is that
entrepreneurs and innovators such as Olivia Lum, Sim Wong Hoo and
Ron Sim have individually created many more jobs for Singaporeans
than any government scholar or bureaucrat. Is it no wonder, then,
that leaders such as S. Dhanabalan and DPM Jayakumar (ref.
“Jayakumar wants Singapore top students to study in local
varsities”) have recently lamented that allowing top students to go
overseas is a bad thing? And, while it may appear that the
government is unrolling campaigns encouraging entrepreneurship in
schools, such campaigns are but lip service when millions of
dollars continue to be thrown at scholarships designed to suck
youngsters into government ranks.
The recent housing pains and productivity drops are symptomatic
of a quick-fix mentality that can ultimately only exacerbate
Singapore’s population and economic problems, rather than alleviate
them. Until fundamental, structural issues in Singapore’s economy
are tackled head-on, Singapore will continue to see its fertility
rate remain low and its productivity (and competitiveness) slide.
At the end of the day, the PAP cannot continue to pump more and
more immigrants onto this little island. Sooner or later,
Singaporeans need to find a way to return their fertility rate to
replacement levels, and make the cost of family formation
affordable. Singapore will need to find a way to foster genuine
innovation and entrepreneurship and to improve worker
productivity.
So far, the PAP doesn’t seem to be doing very well in coming up
with the right solutions.
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